On December 31, Strike Company has decided to discard one of its batting cages. The equipment had an initial cost of $223,004 and has accumulated depreciation of $200,703.60. Depreciation has been recorded up to the end of the year. Which of the following will be included in the entry to record the disposal? a. Gain on Disposal of Asset, credit, $22,300.40 b. Loss on Disposal of Asset, debit, $200,703.60 c. Equipment, credit, $223,004 d. Accumulated Depreciation, debit, $223,004
Since Strike Company has decided to discard the equipment, the cost and accumulated depreciation should be removed from books of the company. Any difference between the sale price and net cost of the equipment will then be recorded as an income/loss on disposal. The journal entry for such disposal would be as follows:
Date | General Journal | Debit | Credit |
Dec-31 | Cash a/c | Sale amount | |
Loss on disposal a/c (In case of loss) | Amount of loss | ||
Equipment a/c | $2,23,004 | ||
Accumulated depreciation a/c | $2,00,703.60 | ||
Gain on disposal (In case of gain) | Amount of gain | ||
(Being equipment disposed on gain/loss) | |||
Hence, option c is the correct answer. |
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